Other Comprehensive income. Examples. Disclosure
What is other comprehensive income?
Other comprehensive income (OCI) are income and expenses recognised outside of profit or loss, as required by particular IFRS Standards. Income and expenses are taken to OCI only if there is more relevant information or faithful representation of financial statements to the users.
In a financial statement, other comprehensive income summarises all unrecognised gains and losses affecting a company's equity during the reporting period.Â
It is essential to understand this concept because it can provide valuable insights into a company's overall financial health.Â
For example, suppose there are large fluctuations in other comprehensive income from one year to the next. In that case, it could indicate something wrong with the business. Investors and analysts will often closely scrutinise this line item to better understand what's happening with a company.
The most common example of other comprehensive income is a revaluation surplus which arises when an entity decides to account for an increase in the value of land and buildings.
Example :Â
Entity A owns land and buildings that are accounted for using the revaluation model in IAS 16 Property, Plant and Equipment. Entity A revalued these assets from $350 million to $400 million at the reporting date. IAS 16 stipulates that the $50 million gain must be recognised in other comprehensive income.
Journal entry
Statement of financial position:
Dr Non-current asset – land $50 Million
Cr Revaluation surplus (within equity) $50 million
Criticism of OCI
-Many users ignore OCI since the gains and losses reported are unrelated to an entity's trading cash flows. As a result, material expenses presented in OCI may not be given the attention they require.
- Reclassification from OCI to profit or loss results in profits or losses being recorded in a different period from the change in the related asset or liability. This contradicts the definitions of income and expenses in the conceptual Framework.
List of accounting standards under IFRS impacting OCI
- Equity instruments are measured at fair value through other comprehensive income (FVOCI) (if shares are not held for trading) under IFRS 9.
- Revaluation gains as per IAS 16 are credited to the revaluation surplus. The revaluation gain is shown as other comprehensive income.
- Foreign currency exchange gains and losses arising from the consolidation of a foreign operation are reported in other comprehensive income (OCI).
- Remeasurement of actuarial gains or losses on long-term employee benefits is charged or credited to other comprehensive income.
Examples of Disclosure of OCI
 Other suggested reading to improve concepts on accounting
From the blog
View allOther popular blogs
Follow these links to help you prepare for the ACCA exams
Follow these blogs to stay updated on IFRS
Use these formats for day to day operations
- Account closure format
- Insurance claim letter format
- Transfer certification application format
- Resignation acceptance letter format
- School leaving certificate format
- Letter of experience insurance
- Insurance cancellation letter format
- format for Thank you email after an interview
- application for teaching job
- ACCA PER examples
- Leave application for office
- Marketing manager cover letter
- Nursing job cover letter
- Leave letter to class teacher
- leave letter in hindi for fever
- Leave letter for stomach pain
- Leave application in hindi
- Relieving letter format
Link for blogs for various interview questions with answers
- Strategic interview questions
- Accounts payable interview questions
- IFRS interview questions
- CA Articleship interview questions
- AML and KYC interview questions
- Accounts receivable interview questions
- GST interview questions
- ESG Interview questions
- IFRS 17 interview questions
- Concentric Advisors interview questions
- Questions to ask at the end of an interview
- Business Analyst interview questions
- Interview outfits for women
- Why should we hire you question
Popular blogs
Leave application format
Crafting the perfect leave application for any scenario, from personal emergencies to medical leaves, often presents a challenge. To simplify this task, we've assembled an extensive index of leave application formats designed for various circumstances. Our collection is aimed at enhancing the clarity and professionalism of your leave requests. Dive into our index to discover the template that aligns with your specific needs, facilitating a smoother leave application journey.
List of Leave application formats
- Leave application for office
- Leave application for school
- Leave application for sick leave
- Leave application for marriage
- leave application for personal reasons
- Maternity leave application
- Leave application for sister marriage
- Casual leave application
- Leave application for 2 days
- Leave application for urgent work
- Application for sick leave to school
- One day leave application
- Half day leave application
- Leave application for fever
- Privilege leave
- Leave letter to school due to stomach pain
- How to write leave letter
Â
Leave a comment